O'Malley writes to Sparrows Point lender

Governor asks GE chairman to help stabilize financial arrangements

December 29, 2011|By Alison Knezevich, The Baltimore Sun

Gov. Martin O'Malley has asked a key lender to R.G. Steel to reconsider its decision to freeze some company funds, saying the move has contributed to the firm's decision to lay off workers at its Sparrows Point mill.

In a letter dated Wednesday, O'Malley asked General Electric Chairman and CEO Jeffrey Immelt for help in "stabilizing the financial arrangements that helped build R.G. Steel, America's fourth largest steel company."

General Electric's financial services unit, GE Capital, led 10 other institutions in financing the stock purchase sale that created the steel company, according to O'Malley's letter, which his office released Thursday. The arrangement included giving R.G. Steel a revolving line of credit, for which the steel company put up collateral.

According to O'Malley's letter, GE Capital and other lenders have shifted funds needed to support business operations to "reserves" to further secure the loan.

"R.G. Steel feels that this decision has frustrated its efforts to improve its liquidity situation and runs counter to the purpose of the financing arrangement, forcing it to begin laying off workers," wrote the governor, who later added that the company projects a positive cash flow by the first quarter of 2012.

About 2,000 people work at the Sparrows Point plant. The company has given state unemployment officials a list of about 720 employees it plans to furlough, saying it expects them to be back on the job by early March.

Also Thursday, Baltimore County Executive Kevin Kamenetz wrote to R.G. Steel President and CEO John Goodwin, saying the lack of information from the company regarding Sparrows Point has made it "very difficult" for government to help workers.

Kamenetz asked Goodwin to send the county's economic development chief specific, up-to-date information about the company's plans so that government officials can help connect Sparrows Point employees with services such as job training and unemployment benefits.

"The absence of information has made it very difficult for Baltimore County, the State, and federal government to mobilize the services that the men and women of Sparrows Point need," Kamenetz wrote.